The steel industry is critical in the reconstruction and recovery plan for the South African economy, particularly the manufacturing, mining, construction, engineering, and transportation sectors, said the Department of Trade, Industry and Competition (dtic).

In a statement responding to ArcelorMittal South Africa’s (AMSA) announcement to wind down its longs steel business at its Newcastle plant, the department said the steel industry is important to the sectors that are at the centre of the industrialisation, localisation and beneficiation programmes of government.

“The department notes with serious concern the announcement by ArcelorMittal South Africa to wind down its longs steel business at its Newcastle plant. In fulfilment of its mandate to work with the private sector in growing the local economy the dtic remains committed to working with AMSA to find a workable and lasting situation,” it said in a statement on Wednesday.

During the course of 2024, AMSA had reached out to various government departments and state-owned entities with requests for different concessions for their business. Having taken heed of these requests, the Minister of the dtic took the decision to form a comprehensive and coordinated approach to resolving the issues raised by AMSA.

“In doing so, the Minister set up a technical working group made up of the relevant stakeholders including the dtic and AMSA, the departments of Electricity and Energy, Transport, as well as Eskom, Transnet and private sector stakeholders.”

The department said the working group held regular engagements up until and well into December 2024.

“This work has been noted in the statement released by AMSA. It has always been, and continues to be the intention of government to continue these engagements until a workable resolution to the problems faced by AMSA and the steel industry is reached,” said the department.

In a press statement on Monday, AMSA said it had taken the decision to wind down the longs business.

“This comes after sustained challenges, including weak economic growth, high logistics and energy costs, and an influx of low-cost steel imports, particularly from China. Persistent high logistics and energy costs, combined with insufficient policy interventions (especially those policy decisions made some time ago (namely, the Price Preference System [PPS] and export scrap tax) relating to the substantial subsidisation of scrap-based steelmaking operations to the detriment of the Newcastle Works – which beneficiates South African-sourced raw materials), have left the longs business unsustainable. Despite extensive consultations with government and stakeholders to find viable solutions to sustain the longs business, progress was insufficient to avert the wind down,” said AMSA.

In its statement on Wednesday, the dtic said that while the immediate task will be on addressing structural issues affecting AMSA’s longs steel business, the broader focus should also be on addressing productivity improvements and supply chain efficiencies, investments in low-carbon technologies, competitiveness and regaining the market share.

“It is also important that public and private sector’ entities and companies commit themselves to procure locally manufactured steel products in their projects. Undoubtedly, such a commitment will contribute positively to aggregate demand, job creation and economic growth in South Africa,” it said.

“AMSA will now transition the longs business into care and maintenance. Steel production is anticipated to cease by late January 2025, with the wind-down of the remaining production processes completed in Q1 2025,” said AMSA.

This wind down decision will directly affect operations constituting Newcastle (in KwaZulu-Natal) and Vereeniging Works (in Gauteng) and AMRAS (the rail and structural subsidiary).

Newcastle’s coke-making operations will continue, though scaled back to reflect reduced demand.

Originally posted on SAnews.gov.za